Why Send Questionnaires?

Pfizer developed a new drug, sildenafil citrate, intending to treat angina. In human trials, it failed utterly in its intended purpose but revealed an unintended, unexpected, welcome, and valuable side-effect of increasing blood flow in men. This happy accident yielded the new drug we know and love as "Viagra". While it does nothing for angina, it proved to do wonders for the vagina. Those who use and enjoy it don't need to know how it works - only that it works.

Similarly, the Questionnaires available here on DutytoDefend.com were developed to illicit insightful answers. But practical experience teaches that like Viagra, the Questionnaires usually fail utterly in their intended purpose - at least on the first try. Instead these Questionnaires reliably produce an unintended, unexpected, but welcome, and valuable side effect - prompt and generous settlements. Policyholders who send Questionnaires don't need to know how they work - only that they work. Try it! You'll like it!

Because there's no harm in asking, sending Questionnaires bears little of no risk to the policyholder.

Four Possible Questionnaire Responses

When a policyholder sends a Questionnaire, there are only four possible responses: 1) truth; 2) lies; 3) silence; and 4) settlement. Responsible insurers and ethical lawyers will have nothing to fear in responding to the Questionnaires truthfully. Others may choose to lie. Still others may recognize that Questionnaires hit them where it hurts - in their breaches: insurers and their lawyers who fear that they have breached fiduciary duties to the policyholders may be afraid to respond at all. The remaining option of settlement at no cost to the policyholder may avoid the penalties of telling lies and excuses silence by making both the policyholder and the plaintiff happy.

Sending Questionnaires has additional benefits. Sending them may reveal whether the insurer or its lawyers can be trusted. They make a record of admissible evidence that distinguish among recipients as truthful, deceitful, or paralyzed. Policyholders may informally ask each recipient who fails to respond to orally answer to each question as the policyholder completes the form and sends it to the recipient for comment and correction. They may ultimately serve as a deposition outline, with this embarrassing follow up question: "Why did the policyholder have to sue you in order to get this question answered?"

Sending Questionnaires Produces Prompt and Generous Settlements

The precise causal link between asking questions and prompt, generous settlements may never be known since only the insurers and their lawyers know their motivation and they rarely talk. But it is inferable that questions tap into the three things that insurers and their lawyers fear most: 1) the unknown; 2) making bad law; and 3) bad faith liability.

Settling the plaintiff's liability dispute at no cost to the policyholder allays all three fears while also resolving all policy coverage controversies and all legal ethical challenges - a trifecta in which the plaintiff wins the liability dispute, the policyholder wins the coverage contest, and dependent counsel avoids an ethical imbroglio! The mere act of sending the Questionnaires often yields an insurer funded settlement and makes both the policyholder and the plaintiff winners.

Policyholder's Power

Policyholders wield great power over liability insurers and their lawyers in potential conflict of interest situations because: 1) dependent counsel owe them fiduciary duties1; 2) insurers owe them fiduciary-like duties2; 3) dependent counsel always represent dual clients3; 4) a response to a summons is due in only 30 days4; 5) dependent counsel must clear potential conflicts of interest before responding to a summons5; 6) dependent counsel must have the policyholder's authority to appear in court6; and 7) dependent counsel may not accept employment or compensation from an insurer without the policyholder's informed written consent7. Quite properly, the law heavily favors the naive client over the sophisticated and regulated insurer and lawyer.

Exercise of Power: Expressly Withhold Consent and Authority

"You do not have my consent or authority to represent me until you have complied with Rule 3-310" are words that paralyze most dependent counsel like deer in the headlights. The risk of ethical violations tends to make dependent counsel vulnerable and scared. By extension, insurers that hire unethical counsel to defend their insureds risk breaching their duty to defend. Thus, both insurers and their lawyers may be in breach of their duties to the policyholder by failing to respond to Questionnaires when the policyholder simply says those words to dependent counsel.

Insurer's Duty to Respond to Questionnaires

Liability insurers are required to respond to inquiry. "Upon receiving any communication from a [policyholder] that reasonably suggests that a response is expected, every [insurer] shall immediately, but in no event more than fifteen (15) calendar days after receipt of that communication, furnish the [policyholder] with a complete response based on the facts as then known by the [insurer]."8

Truthful responses will inform the policyholder whether the insurer accepts full coverage, denies all coverage, or a little bit of both. "Upon receiving proof of claim, every insurer shall immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part. Where an insurer denies a claim, in whole or in part, it shall do so in writing and shall provide to the [policyholder] a statement listing all bases for such denial and the factual and legal bases for each reason given for such denial which is then within the insurer's knowledge. Where an insurer's denial is based on a specific policy provision, the written denial shall include reference thereto and provide an explanation of the application of the provision to the claim."9 This regulation requires an insurer to respond to a policyholders cry for "help" with a simple "Yes", "No", or "Maybe". The insurer must immediately "accept claim in whole" ("Yes"); or deny the claim in whole ("No"); or accept and deny the claim in part ("Maybe"), usually by issuing a reservation of rights letter.

Clarity of a reserving insurer's coverage position helps a policyholder to be able to protect herself from a reserving insurer. "Through reservation, the insurer gives the insured an opportunity to take any steps that it may deem reasonable or necessary in response."10 While regulations require responsible insurers to voluntarily tell the policyholder everything, Questionnaires make a valuable, written record that irresponsible insurers have breached their duties.

Dependent Counsel's Duty to Respond to Questionnaires

Dependent counsel owe parallel duties of disclosure and to respond to inquiry. Rule 3-310 prohibits a lawyer from accepting or continuing employment to represent two parties with potentially conflicting interests without analyzing potential conflicts, making written disclosure to, and obtaining informed written consent from the policyholder. The penalties for failing to do so include disbarment, discipline, civil liability, and disgorgement of fees.11

Coverage Questionnaire

The Coverage Questionnaire to the insurer asks 59 questions and was intended to develop immediate illumination of the insurer's investigation, settlement efforts, relationship with dependent counsel, the applicability of Civil Code § 2860, the scope of its coverage challenges, its critical decisions, whether the policyholder has breached any policy obligation, established standards for processing claims, and its business practices. In human trials, this Questionnaire proved to be an utter failure to illuminate any of these matters "immediately". This Questionnaire may be downloaded and modified. For example, the questions about the insurer's relationship with dependent counsel may be deleted when an insurer does not hire dependent counsel. The "Yes" version of this Questionnaire may be sent to insurers which accept full coverage.

Ethical Compliance Questionnaire

The Ethical Compliance Questionnaire to dependent counsel asks 46 questions and was intended to develop immediate illumination of the insurer's lawyers' settlement efforts, relationship with the insurer, the proposed relationship with the policyholder/client, potential conflicts of interest, and their business practices. In human trials, this Questionnaire also proved to be an utter failure to illuminate any of these matters "immediately". This Questionnaire may be downloaded and modified. The "Yes" version of this Questionnaire may be sent to dependent counsel when the insurer accepts full coverage.

Reasons to Send Questionnaires Other than Settlement

•	Can the Insurer be Trusted?

Innocent and responsible insurers may respond to a Coverage Questionnaire with the truth. Malevolent insurers may lie. Frightened insurers may refuse to respond. Policyholders may discern whether the insurer is telling the truth by reference to Annotated versions of the Questionnaires. Insurers that refuse to respond probably have something to hide. Sending a Coverage Questionnaire forces all insurers to choose how to respond and thereby reveal to their policyholder their true nature - including whether they can be trusted.

•	Can Dependent Counsel be Trusted?

Innocent and responsible dependent counsel may respond to an Ethical Compliance Questionnaire with the truth. Malevolent dependent counsel may lie. Frightened dependent counsel may refuse to respond. Sending an Ethical Compliance Questionnaire forces all dependent counsel to choose how to respond and thereby reveal to their client their true nature - including whether they can be trusted.

•	Satisfy a Pleading Requirement

Sending Questionnaires, obtaining a satisfactory responses, or confirming the recipient's refusal to respond may be a necessary prerequisite to filing suit. In one notable opinion, a court sustained without leave to amend a policyholder's coverage complaint that lacked factually specific allegations. "We conclude the facts alleged by [the policyholder] do not support its claim of a conflict of interest with [the insurer]. . . . [The policyholder] argues . . . without giving any explanation about how [and] offers a host of allegations about how [the insurer] will control the litigation without describing how this is occurring. . . . [The policyholder] is alleging conclusions without substance, not facts. As Gertrude Stein famously said about Oakland, there is no there there."12

•	Oral Follow-up

Whether or not a recipient of a Questionnaire completes and returns it, policyholders and plaintiffs may learn valuable information about the insurer and its lawyers. The policyholder may meet with or telephone the recipient of a Questionnaire to orally ask all questions not previously answered. In human trials, some insurers and their lawyers have hung up on the policyholder. Such rude conduct is actually quite revealing and tends to refocus the controversy away from the plaintiff's liability dispute and toward dependent counsel's ethical imbroglio and the insurer's coverage contest. When all three tussles are in play, cases tend to settle.

•	Presage Formal Discovery

Recipients who respond to Questionnaires truthfully and completely have nothing to fear. Those who lie and those who breach regulatory obligations to immediately response have much to fear. The policyholder may simply call the insurer's claim agent and/or dependent counsel, ask all of the questions on the Questionnaire, complete the "Yes" or "No" boxes, and send the completed form to the recipient with an invitation to correct any errors.

•	Conduct Formal Discovery

If dependent counsel or an insurer fail to respond meaningfully to any Questionnaire, the policyholder may sue dependent counsel for breach of fiduciary duty and the insurer for breach of contract. The Questionnaire may be used as a deposition guide under circumstances in which the deponent simply cannot properly refuse to respond. Also, the deponent may be compelled to answer why he or she failed to respond meaningfully in the first place.

Risks

Policyholders who withhold consent and authority for dependent counsel to represent them until receipt of complete responses to the Questionnaires are likely to be accused of violating the cooperation clause of the policy. However, no reported opinion in California or in any other American jurisdiction has ever litigated and held that asking proper questions violates the cooperate clause. Indeed, the most that is clearly required of the policyholder by the cooperation clause is to show up and respond truthfully in discovery and at trial. Like faith in God, sending Questionnaires costs nothing and promises infinite rewards. It's worth a try.

Conclusion

Questionnaires can be powerful tools. Policyholders are entitled to ask. Insurers and dependent counsel are required to respond. Recipients who are fearful that they have breached obligations to the policyholder may save themselves by causing the plaintiff's liability dispute to settle. In cases that do not promptly settle, the insurer and dependent counsel are likely to lose control of the defense and perhaps lose control of settlement.

"Try it! You'll like it!" "There's no harm in asking!" "Its worth a try."